Question 1

Aggregate expenditure is the sum of

Accepted Answer

A)  all types of spending by households and firms 
B)  spending and savings by households 
C)  spending by households and governments on final goods and services 
D)  spending by households,government,firms,and foreigners on final goods and services 
E)  all spending and saving by households,firms,and governments 
A)  all types of spending by households and firms 
B)  spending and savings by households 
C)  spending by households and governments on final goods and services 
D)  spending by households,government,firms,and foreigners on final goods and services 
E)  all spending and saving by households,firms,and governments

Question 2

The slope of the consumption function can be determined by dividing the change in

Accepted Answer

A)  real consumption spending by the change in real disposable income 
B)  nominal spending by the change in nominal disposable income 
C)  real disposable income by the change in real consumption spending 
D)  nominal disposable income by the change in nominal consumption spending 
E)  total consumption spending by the change in autonomous consumption spending 
A)  real consumption spending by the change in real disposable income 
B)  nominal spending by the change in nominal disposable income 
C)  real disposable income by the change in real consumption spending 
D)  nominal disposable income by the change in nominal consumption spending 
E)  total consumption spending by the change in autonomous consumption spending

Question 3

-Refer to Figure 11-3.Which of the following could explain the shift from C₁ to C₂?

Accepted Answer

A)  An increase in disposable income 
B)  An increase in net taxes that increases the marginal propensity to consume 
C)  A decrease in net taxes that increases the marginal propensity to consume 
D)  An increase in net taxes that increases autonomous consumption spending 
E)  A decrease in net taxes that increases autonomous consumption spending. 
A)  An increase in disposable income 
B)  An increase in net taxes that increases the marginal propensity to consume 
C)  A decrease in net taxes that increases the marginal propensity to consume 
D)  An increase in net taxes that increases autonomous consumption spending 
E)  A decrease in net taxes that increases autonomous consumption spending.

Question 4

If the output level is such that the aggregate expenditure line lies below the 45-degree line,which of the following is true?

Accepted Answer

A)  Aggregate expenditure is greater than output,so inventories will increase and output will be raised. 
B)  Aggregate expenditure is greater than output,so inventories will decrease and output will be increased. 
C)  Aggregate expenditure is less than output,so inventories will decrease and output will be raised. 
D)  Aggregate expenditure is less than output,so inventories will increase and output will be lowered. 
E)  Aggregate expenditure is greater than output,so inventories will increase and output will be lowered. 
A)  Aggregate expenditure is greater than output,so inventories will increase and output will be raised. 
B)  Aggregate expenditure is greater than output,so inventories will decrease and output will be increased. 
C)  Aggregate expenditure is less than output,so inventories will decrease and output will be raised. 
D)  Aggregate expenditure is less than output,so inventories will increase and output will be lowered. 
E)  Aggregate expenditure is greater than output,so inventories will increase and output will be lowered.

Question 5

Which of the following is not considered an automatic stabilizer?

Accepted Answer

A)  Food stamp program for people with low incomes 
B)  Welfare program for families with dependent children 
C)  Medicaid,a health program for the poor 
D)  Financial assistance for disabled people 
E)  Unemployment programs that pay benefits to those who lose their jobs. 
A)  Food stamp program for people with low incomes 
B)  Welfare program for families with dependent children 
C)  Medicaid,a health program for the poor 
D)  Financial assistance for disabled people 
E)  Unemployment programs that pay benefits to those who lose their jobs.

Question 6

In the short-run macro model,if firms produce more output than they sell,those firms will

Accepted Answer

A)  increase the prices of their products 
B)  decrease their output 
C)  increase their output 
D)  cut back on their consumption spending 
E)  increase the prices of their products and reduce the amount of output they produce 
A)  increase the prices of their products 
B)  decrease their output 
C)  increase their output 
D)  cut back on their consumption spending 
E)  increase the prices of their products and reduce the amount of output they produce

Question 7

Equilibrium GDP is reached when

Accepted Answer

A)  aggregate expenditure exceeds GDP 
B)  aggregate expenditure is less than GDP 
C)  aggregate expenditure equals the level of output 
D)  the level of output is greater than aggregate expenditure 
E)  the level of output is less than aggregate expenditure 
A)  aggregate expenditure exceeds GDP 
B)  aggregate expenditure is less than GDP 
C)  aggregate expenditure equals the level of output 
D)  the level of output is greater than aggregate expenditure 
E)  the level of output is less than aggregate expenditure

Question 8

If net exports decrease by $10 billion and the MPC is 0.9,what is the ultimate change in GDP?

Accepted Answer

A)  $100 billion 
B)  -$10 billion 
C)  $10 billion 
D)  -$100 billion 
E)  -$9 billion 
A)  $100 billion 
B)  -$10 billion 
C)  $10 billion 
D)  -$100 billion 
E)  -$9 billion

Question 9

Which of the following statements is accurate?

Accepted Answer

A)  When unplanned inventory changes are positive,GDP is below its equilibrium value 
B)  When unplanned inventory changes are negative,GDP is above its equilibrium value 
C)  When unplanned inventory changes are positive,GDP is at its equilibrium value 
D)  When unplanned inventory changes are negative,GDP is below its equilibrium value 
E)  None of the above 
A)  When unplanned inventory changes are positive,GDP is below its equilibrium value 
B)  When unplanned inventory changes are negative,GDP is above its equilibrium value 
C)  When unplanned inventory changes are positive,GDP is at its equilibrium value 
D)  When unplanned inventory changes are negative,GDP is below its equilibrium value 
E)  None of the above

Question 10

If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?

Accepted Answer

A)  -$10,000 
B)  $2,500 
C)  $1,000 
D)  $10,000 
E)  -$1,000 
A)  -$10,000 
B)  $2,500 
C)  $1,000 
D)  $10,000 
E)  -$1,000

Question 11

Which of the following statements is true?

Accepted Answer

A)  When a change in income causes consumption to change,the consumption-income line shifts;however,when anything besides income changes,we move along the line. 
B)  When a change in income causes consumption to change,we move along the consumption-income line;however,when anything besides income changes,the line shifts. 
C)  When income or anything else affecting consumption changes,we move along the consumption-income line. 
D)  When income or anything else affecting consumption changes,the consumption-income line shifts. 
E)  There is no way to determine,without more information,whether a change in income or anything else will shift the consumption line or cause movement along the consumption-income line. 
A)  When a change in income causes consumption to change,the consumption-income line shifts;however,when anything besides income changes,we move along the line. 
B)  When a change in income causes consumption to change,we move along the consumption-income line;however,when anything besides income changes,the line shifts. 
C)  When income or anything else affecting consumption changes,we move along the consumption-income line. 
D)  When income or anything else affecting consumption changes,the consumption-income line shifts. 
E)  There is no way to determine,without more information,whether a change in income or anything else will shift the consumption line or cause movement along the consumption-income line.

Question 12

The larger the multiplier,the more stable the economy.

Accepted Answer

A) True 
 B)False

Question 13

In the short run,

Accepted Answer

A)  spending determines income,but not the other way around 
B)  income determines spending,but not the other way around 
C)  spending determines the interest rate,but not the other way around 
D)  spending determines income,and income determines spending 
E)  spending determines the productivity,and productivity determines spending. 
A)  spending determines income,but not the other way around 
B)  income determines spending,but not the other way around 
C)  spending determines the interest rate,but not the other way around 
D)  spending determines income,and income determines spending 
E)  spending determines the productivity,and productivity determines spending.

Question 14

Which of the following changes would probably not lead to an increase in aggregate expenditure?

Accepted Answer

A)  an increase in aggregate wage income 
B)  an increased mood of optimism about the nation's economic prospects 
C)  an increase in the value of corporate stocks 
D)  a decrease in the income tax rate 
E)  an increase in the interest rate 
A)  an increase in aggregate wage income 
B)  an increased mood of optimism about the nation's economic prospects 
C)  an increase in the value of corporate stocks 
D)  a decrease in the income tax rate 
E)  an increase in the interest rate

Question 15

If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?

Accepted Answer

A)  $16,000 
B)  $7,000 
C)  $6,400 
D)  $3,840 
E)  $8,000 
A)  $16,000 
B)  $7,000 
C)  $6,400 
D)  $3,840 
E)  $8,000

Question 16

An upward shift of the consumption function could be caused by a(n)

Accepted Answer

A)  increase in the interest rate 
B)  decrease in the interest rate 
C)  decrease in wealth 
D)  increase in the autonomous production 
E)  increase in disposable income 
A)  increase in the interest rate 
B)  decrease in the interest rate 
C)  decrease in wealth 
D)  increase in the autonomous production 
E)  increase in disposable income

Question 17

Which of the following lines has a slope equal to the marginal propensity to consume?

Accepted Answer

A)  The demand for loanable funds curve 
B)  The labor demand curve 
C)  The consumption function 
D)  Inventory line 
E)  The 45-degree line 
A)  The demand for loanable funds curve 
B)  The labor demand curve 
C)  The consumption function 
D)  Inventory line 
E)  The 45-degree line

Question 18

-Refer to Figure 11-2.Use the graph to determine the marginal propensity to consume.

Accepted Answer

A)  0.50 
B)  0.60 
C)  0.75 
D)  0.80 
E)  0.90 
A)  0.50 
B)  0.60 
C)  0.75 
D)  0.80 
E)  0.90

Question 19

If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion,what is the change in GDP?

Accepted Answer

A)  $3 trillion 
B)  $1 trillion 
C)  -$3 trillion 
D)  $9 trillion 
E)  -$9 trillion 
A)  $3 trillion 
B)  $1 trillion 
C)  -$3 trillion 
D)  $9 trillion 
E)  -$9 trillion

Question 20

The slope of the aggregate expenditure line is

Accepted Answer

A)  less than zero 
B)  less than 1.0 
C)  equal to 1.0 
D)  greater than 1.0 
E)  the same as the slope of the 45-degree line 
A)  less than zero 
B)  less than 1.0 
C)  equal to 1.0 
D)  greater than 1.0 
E)  the same as the slope of the 45-degree line

Aggregate expenditure is the sum of

The slope of the consumption function can be determined by dividing the change in

-Refer to Figure 11-3.Which of the following could explain the shift from C₁ to C₂?

If the output level is such that the aggregate expenditure line lies below the 45-degree line,which of the following is true?

Which of the following is not considered an automatic stabilizer?

In the short-run macro model,if firms produce more output than they sell,those firms will

Equilibrium GDP is reached when

If net exports decrease by $10 billion and the MPC is 0.9,what is the ultimate change in GDP?

Which of the following statements is accurate?

If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?

Which of the following statements is true?

The larger the multiplier,the more stable the economy.

In the short run,

Which of the following changes would probably not lead to an increase in aggregate expenditure?

If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?

An upward shift of the consumption function could be caused by a(n)

Which of the following lines has a slope equal to the marginal propensity to consume?

-Refer to Figure 11-2.Use the graph to determine the marginal propensity to consume.

If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion,what is the change in GDP?

The slope of the aggregate expenditure line is

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 11: The Short-run Macro Model

Aggregate expenditure is the sum of

The slope of the consumption function can be determined by dividing the change in

-Refer to Figure 11-3.Which of the following could explain the shift from C₁ to C₂?

If the output level is such that the aggregate expenditure line lies below the 45-degree line,which of the following is true?

Which of the following is not considered an automatic stabilizer?

In the short-run macro model,if firms produce more output than they sell,those firms will

Equilibrium GDP is reached when

If net exports decrease by $10 billion and the MPC is 0.9,what is the ultimate change in GDP?

Which of the following statements is accurate?

If the expenditure multiplier is 10 and investment spending decreases by $1,000 billion,what will be the change in GDP?

Which of the following statements is true?

The larger the multiplier,the more stable the economy.

In the short run,

Which of the following changes would probably not lead to an increase in aggregate expenditure?

If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?

An upward shift of the consumption function could be caused by a(n)

Which of the following lines has a slope equal to the marginal propensity to consume?

-Refer to Figure 11-2.Use the graph to determine the marginal propensity to consume.

If the marginal propensity to consume is 2/3 and autonomous consumption spending increases by $3 trillion,what is the change in GDP?

The slope of the aggregate expenditure line is

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

Fiscal Policy

Money, Banks, and the Federal Reserve

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters